 Sam
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Joined: 21 May 2005
Posts: 281
Location: CALIFORNIA
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 Posted: Mon Apr 12, 2004 5:42 am Post subject: Equity, popularity causes of Home Equity Loans, Lines of Cre |
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Equity is an owner's financial position in a property. Equity is the difference between the fair market value of a property and the unpaid principal balance of the mortgage and any liens. It is also known as an ownership interest. The value an owner has in real estate over and above the obligation against the property.
For example, let the fair market value of a property be $500,000 and let the unpaid principal balance of the mortgage be $200,000. Therefore,
Equity = Fair market value - Unpaid principal balance of the mortgage
Equity = $500,000 - $200,000
Equity = $300,000
Home equity loans and lines of credit are very popular because:
- They are secured by the borrower's home - i.e. Smith took a loan from John by giving his home as security.
- Carry low interest rates.
- Carry tax-deductible interest.
- Carry large loan amounts.
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